Cash flow is important for all businesses and can come to an abrupt halt if a customer fails to pay an invoice on time.
If you work for a company and a customer has failed to pay an invoice that has fallen overdue, you are legally entitled to commence enforcement action to recover the debt which is owed.
Depending on the circumstances, we would usually advise that you send out a letter before claim (sometimes known as a letter before action) which is, effectively, a demand for payment. The letter will give a clear timeframe for payment and, should payment not be forthcoming, put the debtor on notice that court proceedings will be issued if payment is not made.
Appointing a solicitor
When businesses are ready to appoint a debt recovery solicitor, they generally want to make sure that the legal costs are kept proportionate to the actual amount that is owing.
After the debtor receives the debt recovery solicitor’s letter, this can open a dialogue with the debtor who may put forward a repayment plan (ie, by offering instalment payments).
In other cases, a debtor may challenge the invoice (for example, if the debtor believes that the works that the invoice relates to were not carried out using reasonable care and skill). If the debtor does challenge the invoice, a debt recovery solicitor can advise you accordingly.
If the debt recovery letter does not prompt payment from the debtor and the period of time provided to the debtor to pay has expired, you may be able to issue county court proceedings.
The Court has staged fees depending on the amount of debt which is owing. The current costs are :
- £455.00 to issue a claim for debts between £5,000.00 and £10,000.00.
- For claims over £10,000.00 but less than £200,000.00 the court fee is 5% of the value of the claim (eg, for a claim of £75,000, the court fee would be £3,750.00
Can I claim for court fees?
You may be legally entitled to claim the Court fee back from the Defendant, as well as interest on the debt and your costs in taking enforcement action.
When assessing exactly what can/cannot be claimed for, it is often worth revisiting the original contractual document between you and the debtor and this is something that a solicitor can advise you on.
Debt recovery solicitors are often able to send the initial debt collection letter for a low, one-off payment, and this can have the effect of compelling the debtor to pay the outstanding invoice.
DISCLAIMER: This article should not be regarded as constituting legal advice in relation to particular circumstances. This article is merely a general comment on the relevant topic. If specific advice is required in connection with any of the matters covered in this article, please speak to Summerfield Browne Solicitors directly.
Published on 22nd November 2017
(Last updated 21st March 2018)